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Lockdown part two: Resilience is key

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As lockdowns and travel restrictions are reintroduced around the world, it is essential that businesses, governments and charities work in close co-operation to ensure the protection of the most vulnerable. COVID-19 and its consequences will clearly be with us for some time to come, so building our long-term resilience is fundamental. These measures must be formed in a calm, reasoned manner and with the long-term implications in mind, writes Yerkin Tatishev, founding chairman of Kusto Group.

My generation in the former Soviet countries went through a similar experience of massive economic and social shock in the 1990s when the USSR collapsed. Having grown through those difficult years, we perhaps have a better sense of perspective now. We know that in order to survive a crisis and flourish afterwards, patience and a plan for the future is required.

Quick wins are always in demand, often without any real consideration for their long-term impact. One can see this in business and politics across all societies, only exacerbated in times of crisis. Amid the general panic, the idea that “something must be done, this is something, therefore we must do it” often takes hold.

At Kusto Group, we already had established a charitable foundation #KustoHelp, which enabled us to deliver $2,4 million of aid to at-risk populations during the pandemic. That we had this structure in place was due to long-term thinking and the recognition that our company has a social responsibility to help those less fortunate.

In business you learn that when you have steady processes already ingrained - you have all systems in place, the right leaders, the right specialists, local competencies - you can adapt far better to a disaster or disruption. If anything, a crisis is a perfect moment to remove all unnecessary procedures, meetings, layers and bottlenecks. In other words, companies that have effective structures in good times, are in a much better position to handle the bad times. In many markets I see divisions of Kusto Group, such as agriculture and construction materials, continue to perform well for this very reason.

The same can be applied to governments and public administration. While no country or company has handled the pandemic perfectly, it has been easy to see that those with good governance have come out much stronger than those without. This learning is a perfect illustration of the need to reform structures if we are to be resilient in the long term.

The World Bank’s chief economist warned two weeks ago that countries would have to take on additional debt to help fight the economic impact of the coronavirus. As undesirable as this normally is for public finances, supporting our industries is an essential investment in the long term. Businesses take years to build up, involving massive investments of time, money and effort. The cost of letting them collapse is far greater than supporting them through the crisis. They also of course have a responsibility to support their workforce, local communities and partners through these difficult times.

Helping businesses survive the crisis is one element, but for the longer term we also have to look at areas that provide future resilience. Education and digitalisation are key to this. Young people and their education are key to a society’s fortunes, but it’s always one of the first places that cutbacks are made when the going gets tough.

With schooling and university now largely being held online, poverty has become a greater predictor than ever of success, as good access to the Internet becomes a necessity. The rapid digitalisation of our economies likewise means that those countries, businesses, and workers with poor connectivity will struggle to keep up. Investment in both these areas will be absolutely essential to a durable recovery. With the Yerzhan Tatishev Foundation, focusing on tech and innovation, and the High Tech Academy I have tried to make my own modest contribution to this effort.

This pandemic is a crisis of a scale not seen in recent memory. Mitigating its impact will require an equally unprecedented level of cooperation between stakeholders across our society. Beyond providing vital support to businesses, we have to look to our long-term resilience and growth, through education and digitalization. This pandemic will be with us for some time now. There will be other crises ahead. Are we ready for them?

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Coronavirus: Commission presents 'Staying safe from COVID-19 during winter' strategy

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Today (2 December), the Commission adopted a strategy for a sustainably managing the pandemic over the coming winter months, a period that can bring a risk of increased transmission of the virus owing to specific circumstances such as indoor gatherings. The strategy recommends continued vigilance and caution throughout the winter period and into 2021 when the roll out of safe and effective vaccines will occur.

The Commission will then provide further guidance on a gradual and coordinated lifting of containment measures. A coordinated EU wide approach is key to provide clarity to people and avoid a resurgence of the virus linked to the end of year holidays. Any relaxation of measures should take into account the evolution of the epidemiological situation and sufficient capacity for testing, contact tracing and treating patients.

Promoting the European Way of Life Vice President Margaritis Schinas said: “In these extremely difficult times, guidance to Member States to promote a common approach to the winter season and in particular on how to manage the end of the year period, is of vital importance. We need to curtail future outbreaks of infection in the EU. It is only through such a sustained management of the pandemic, that we will avoid new lockdowns and severe restrictions and overcome together.”

Health and Food Safety Commissioner Stella Kyriakides said: “Every 17 seconds a person loses their life due to COVID-19 in Europe. The situation may be stabilizing, but it remains delicate. Like everything else this year, end of the year festivities will be different. We cannot jeopardise the efforts made by us all in the recent weeks and months. This year, saving lives must come before celebrations. But with vaccines on the horizon, there is also hope. All member states must now be ready to start vaccination campaigns and roll-out vaccines as quickly as possible once a safe and effective vaccine is available.”

Recommended control measures

The staying safe from COVID-19 during winter strategy recommends measures to keep the pandemic under control until vaccines are widely available.

It focuses on:

Physical distancing and limiting social contacts, key for the winter months including the holiday period. Measures should be targeted and based on the local epidemiological situation to limit their social and economic impact and increase their acceptance by people.

Testing and contact tracing, essential for detecting clusters and breaking transmission. Most member states now have national contact tracing apps. The European Federated Gateway Server (EFGS) enables cross-border tracing.

Safe travel, with a possible increase in travel over the end-of-year holidays requiring a coordinated approach. Transport infrastructure must be prepared and quarantine requirements, which may take place when the epidemiological situation in the region of origin is worse than the destination, clearly communicated.

Healthcare capacity and personnel: Business continuity plans for healthcare settings should be put in place to make sure COVID-19 outbreaks can be managed, and access to other treatments maintained. Joint procurement can address shortages of medical equipment. Pandemic fatigue and mental health are natural responses to the current situation. Member states should follow the World Health Organisation European Region's guidance on reinvigorating public support to address pandemic fatigue. Psychosocial support should be stepped up too.

National vaccination strategies.

The Commission stands ready to support member states where necessary in the deployment of vaccines as per their deployment and vaccination plans. A common EU approach to vaccination certificates is likely to reinforce the public health response in Member States and the trust of citizens in the vaccination effort.

Background

Today's strategy builds on previous recommendations such as the April European road map on the careful phasing out of containment measures, the July Communication on short-term preparedness and the October Communication on additional COVID-19 response measures. The first wave of the pandemic in Europe was successfully contained through strict measures, but relaxing them too fast over the summer led to a resurgence in autumn.

As long as a safe and effective vaccine is not available and a large part of the population not immunised, EU member Sstates must continue their efforts to mitigate the pandemic by following a coordinated approach as called for by the European Council.

Further recommendations will be presented in early 2021, to design a comprehensive COVID-19 control framework based on the knowledge and experience so far and the latest available scientific guidelines.

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Surviving the pandemic: Lessons from Germany's Mittelstand

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In Germany’s industrial heartland, engineering firms have come up with a recipe for surviving the coronavirus pandemic, write and

Keep spending on research and development even if sales drop, build a financial buffer so you can craft a long-term business plan, be flexible with dealers to keep supply chains intact, have an innovative mindset and see crises as opportunities.

It’s certainly a strategy that is paying off for some of the small and mid-sized 'Mittelstand' companies (SMEs) that together provide almost 60% of all jobs in Germany, according to Reuters interviews with six chief executives.

Commerzbank, the biggest lender to Mittelstand firms, also told Reuters that the number of companies going into “intensive care” was lower than it had feared and there was no rush by its clients to get new credit lines.

Stihl, for example, took an unusual step when lockdowns hit sales of its chainsaws, lawn mowers and hedge trimmers - it carried on making them and helped some of its struggling retailers stay afloat by extending their payment terms, Chief Executive Bertram Kandziora (pictured) told Reuters.

The gambit paid off.

After a tough couple of months, demand soared for Stihl’s tools as people stuck in lockdowns spruced up their gardens. Since May, Stihl has enjoyed double-digit sales growth and is working on Sundays to fill its orders.

To be sure, the landscaping industry has been a sweet spot during the crisis but Stihl’s ability to navigate the lean lockdown months reflects a particular advantage of Mittelstand firms - they are typically family owned, with long-term horizons and strong balance sheets to see them through rough patches.

SMEs in Germany are also generally larger than in other European Union states, surveys by the European Statistics Office, Eurostat, show. Moreover, 90% of German companies - specialist engineering firms featuring prominently among them - are family controlled, says the BVMW Mittelstand association.

The upshot is that fewer German SMEs turned to banks for loans in the April-September period than similar companies in Spain, Italy and France, a European Central Bank survey shows.

An August survey by management consulting firm McKinsey of over 2,200 SMEs in five European countries showed fewer German firms feared they would have to postpone growth programmes than companies in France, Italy, Spain and the United Kingdom.

“Due to the fact that the majority is still family owned, the equity ratio is high and offers a good cushion for difficult times,” said McKinsey partner Niko Mohr, a Mittelstand expert.

Stihl, a family business founded in 1926, took the decision not to become hostage to banks several decades ago.

It has since built up its equity ratio to 70% to ensure it can take business decisions independently of any lenders who may be more focused on the short term.

“Because of the negative attitude of the banks, the family owning the company then came to the conclusion that they should not let the banks dictate their policy but should in future finance the company from their own resources,” Kandziora said.

Arburg GmbH, a family-owned manufacturer of injection moulding machines for plastics processing near Stuttgart, also went into the pandemic with solid finances, which allowed it to look through the crisis.

“The corona pandemic has no impact on our medium- and long-term development and production strategy,” Arburg managing partner Michael Hehl told Reuters. “We firmly believe that it would be completely wrong to put the brakes on innovation now.”

A survey in September survey by Germany’s Mechanical Engineering Industry Association (VDMA) showed a majority of members aim to maintain or raise investment budgets next year, with nearly a fifth planning an increase of 10% or more.

Reuters Graphic

Success stories like Stihl’s belie a mixed COVID-19 picture in Germany. Across all sectors, one in 11 firms is threatened by insolvency, a survey of 13,000 companies by the Association of German Chambers of Industry and Commerce (DIHK) showed.

Patrik-Ludwig Hantzsch at Germany credit agency Creditreform expects 24,000 corporate insolvencies in Germany in 2021 after 16,000 to 17,000 this year.

And businesses more reliant on monthly cash flow are suffering. The German hotel and restaurant association (DEHOGA) said a survey last month of 8,868 businesses in the sector found 71.3% of them feared for their existence.

Commerzbank, however, says many industrial Mittelstand companies have the financial buffers to ride out the storm.

The bank has a team closely scrutinizing the health of its clients, studying everything from business models to figures on customer traffic and holding regular discussions with managers. It is expecting a modest rise in insolvencies once a waiver introduced to keep firms afloat during the crisis is lifted in January, but not the massive rise predicted by some.

“There isn’t a mad rush (for credit),” said Christine Rademacher, head of financial engineering at the bank. “Many of our customers have a buffer and no liquidity issues.”

Koerber in Hamburg is another Mittelstand company - with businesses from artificial intelligence to machines to package toilet paper - that went into the pandemic with solid finances and it has no intention of taking its foot off the pedal.

“We have made and will continue to make sustained and significant investments in research and development and further digitisation this year and next year. The demand for digital solutions has been given a further enormous boost by corona - this is a huge opportunity for us,” Chief Executive Stephan Seifert told Reuters.

In Munich, construction equipment maker Wacker Neuson said it is reviewing some of its investments, but it too is keeping up its R&D.

“The crisis is a balancing act between cost optimisation, a much shorter planning horizon and pressure to innovate,” said Chief Executive Martin Lehner.

The ebm-papst Group, which makes electric motors and high-tech fans, has also kept R&D investment stable this year despite a drop in turnover of almost 30% in April. “Now we are catching up month by month,” said Chief Executive Stefan Brandl.

The company based in Mulfingen is looking to benefit from three trends: air quality, which is at a premium due to the pandemic; digitalisation, which it can serve with fans to cool servers; and demand for products that use less electricity.

For many survivors, the crisis is also accelerating change.

One such company is MAHLE GmbH, which makes auto parts from electric powertrains to air conditioning. It plans to close two German plants and cut other costs to adjust to technological change in its sector and reduced demand due to the pandemic.

But despite an expected drop in sales of about 20% this year, Chief Executive Joerg Stratmann said it is maintaining R&D at a “high level”, such as spending millions on a development centre near Stuttgart with 100 engineers that opened recently.

It remains to be seen whether the Mittelstand is undergoing “creative destruction” - the term popularised in the 1940s by Austrian economist Joseph Schumpeter to describe unviable firms folding to make way for more dynamic enterprises.

But those firms in the right sector with healthy balance sheets say they’re ready to adapt with confidence.

“We want to seize the opportunity of this crisis,” said ebm-papst’s Brandl.

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UK approves Pfizer-BioNTech COVID-19 vaccine, first in the world

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Britain today (2 December) became the first western country to approve a COVID-19 vaccine, jumping ahead of the United States and Europe after its regulator cleared a shot developed by Pfizer for emergency use in record time, write and

The vaccine will be rolled out from early next week in a major coup for Prime Minister Boris Johnson’s government, which has faced criticism over its handling of the coronavirus crisis with Britain enduring the worst official COVID-19 death toll in Europe.

A vaccine is seen as the best chance for the world to get back to some semblance of normality amid a pandemic which has killed nearly 1.5 million people and upended the global economy.

“The government has today accepted the recommendation from the independent Medicines and Healthcare products Regulatory Agency (MHRA) to approve Pfizer-BioNTech’s COVID-19 vaccine for use,” the government said.

Britain touted the approval as a global win and a ray of good hope amid the gloom as big powers race to approve an array of vaccines and inoculate their citizens.

“I’m obviously absolutely thrilled with the news, very proud that the UK is the first place in the world to have a clinically authorized vaccine,” British Health Secretary Matt Hancock said.

China has already given emergency approval for three experimental vaccines and has inoculated around 1 million people since July. Russia has been vaccinating frontline workers after approving its Sputnik V shot in August before it had completed late-stage testing on safety and efficacy.

Pfizer and its German partner BioNTech have said their vaccine is 95% effective in preventing illness, much higher than expected.

The US drugmaker said Britain’s emergency use authorization marks a historic moment in the fight against COVID-19.

“This authorization is a goal we have been working toward since we first declared that science will win, and we applaud the MHRA for their ability to conduct a careful assessment and take timely action to help protect the people of the UK,” said CEO Albert Bourla.

“As we anticipate further authorizations and approvals, we are focused on moving with the same level of urgency to safely supply a high-quality vaccine around the world.”

Britain’s medicines regulator approved the vaccine in record time. Its U.S. counterpart is set to meet on 10 December to discuss whether to recommend emergency use authorization of the Pfizer/BioNTech vaccine and the European Medicines Agency said it could give emergency approval for the shot by 29 December.

“The data submitted to regulatory agencies around the world are the result of a scientifically rigorous and highly ethical research and development program,” said Ugur Sahin, chief executive and co-founder of BioNTech.

Britain’s vaccine committee will decide which priority groups will get the jab first: care home residents, health and care staff, the elderly and people who are clinically extremely vulnerable will be first in line.

Hancock said hospitals were ready to receive the shots and vaccination centres would be set up across the country but he admitted distribution would be a challenge given that the vaccine must be shipped and stored at -70C, the sort of temperature typical of an Antarctic winter.

Pfizer has said it can be stored for up to five days at standard refrigerator temperatures, or for up to 15 days in a thermal shipping box.

Johnson said last month that Britain had ordered 40 million doses of the Pfizer vaccine - enough for just under a third of the population as two shots of the jab are needed per person to gain immunity.

Other frontrunners in the vaccine race include U.S. biotech firm Moderna, which has said its shot is 94% successful in late-stage clinical trials. Moderna and Pfizer have developed their shots using new messenger RNA (mRNA) technology.

AstraZeneca said last month its COVID-19 shot, which is based on traditional vaccine technology, was 70% effective in pivotal trials and could be up to 90% effective.

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